Hertz Global Holdings, Inc. (HTZ - Free Report) reported dismal performance in second-quarter 2017, wherein both sales and earnings lagged estimates and declined year over year. While the bottom line marked the fourth straight quarter of a miss, the top line lagged the estimates after a beat in the previous quarter.
In fact, this Zacks Rank #5 (Strong Sell) stock has plunged over 30% in the last six months, against its industry’s gain of 6.6%. This bearish run is mainly attributable to the company’s disappointing past performances, thus instilling fears among investors about its future prospects.
The company posted a quarterly adjusted loss of 63 cents per share, which was wider than the Zacks Consensus Estimate loss of 12 cents. Results were hurt by weak sales, higher fleet costs and increased spending on systems and brand developments. However, it delivered earnings of 41 cents in the year-ago quarter.
On a reported basis, Hertz Global witnessed a loss of $1.90 per share compared with a loss of 33 cents recorded in the prior-year quarter.
Total revenue slipped 2% year over year to $2,224 million and also came below the Zacks Consensus Estimate of $2,229 million. The decline was owing to soft revenues at the domestic segment.
The company posted adjusted EBITDA of $35 million versus $184 million in the year-ago period.
Currently, Hertz reports under U.S. Rental Car (U.S. RAC), International Rental Car (International RAC) and All Other Operations segments.
Revenues for the U.S. RAC segment dropped 4% year over year at $1,519 million in the quarter, due to a 3% dip in transaction days and 2% decrease in pricing as measured by Total Revenue per Transaction Day (RPD). Further, its adjusted EBITDA loss came in at $22 million, against profits of $168 million in the prior-year quarter.
Quarterly revenues for the International RAC segment came in at $543 million, up about 1% year over year, including negative foreign currency impact. Excluding currency impact of $18 million, revenues grew 4%, driven by a 6% improvement in transaction days, somewhat compensated by a 1% reduction in Total RPD. Additionally, the segment recorded adjusted EBITDA of $63 million in the quarter, up nearly 50% from the year-ago quarter.
Revenues for the All Other Operations segment rose 11% to $162 million. This segment mainly includes Hertz’s Donlen leasing operations. Adjusted EBITDA for the segment grew 6% year over year to $17 million in the quarter.
Hertz ended the quarter with cash and cash equivalents of $1,141 million, total debt of $16,809 million and total equity of $756 million.
As of Jun 30, 2017, the company generated $982 million as cash from operating activities while delivering negative free cash flow of $566 million.
While Hertz performance remained disappointing, the company remains on track with the execution of its turnaround plan. Further, management remains optimistic about its preliminary third-quarter total revenue per day trends in the U.S. rental car segment. Total revenue per day is projected to rise nearly 3% year over year in the month of July. The transaction days for the month are anticipated to be down approximately 4% owing to higher-quality revenue.
Per the early indications, the trend in the month of August is expected to be similar to that of July. Also, the trends are projected to remain soft in September. However, management is likely to remain focused on fleet capacity discipline as well as revenue quality.
In addition, the company remains encouraged about its International RAC bookings that comprises inbound U.S. and Asia, in spite of the terror events in early June.
Stocks to Consider
Better-ranked stocks worth considering in the same industry include Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (PAC - Free Report) , Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (OMAB - Free Report) and Matson, Inc. (MATX - Free Report) .
Grupo Aeroportuario del Pacífico has delivered positive earnings surprise of 14.7% in the last reported quarter, and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Grupo Aeroportuario del Centro Norte has a long-term earnings growth rate of 3% and also sports a Zacks Rank #1.
Matson carries a Zacks Rank #2 (Buy) and has pulled off average positive earnings surprise of 2.9% in the trailing four quarters.
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